Don’t call it a comeback! Seriously … don’t. The market rebound on Wednesday was driven by hopes on Wall Street that the Fed would delay an all-but-official interest rate hike. Specifically, New York Federal Reserve Bank President William Dudley lowered expectations for a hike in September by calling economic indicators “less compelling” amid the recent market meltdown.
With the fire sales still on, traders piled back into stocks, sending the major market indices soaring roughly 4% across the board. The Nasdaq Composite led the way with a surge of 4.2%.
Option volume stayed at its recently elevated perch, with call activity returning to the most active stocks on Wednesday. That said, puts remained the overall favorite, with the CBOE’s single-session equity put/call volume ratio ending up at 0.85 and the 10-day moving average returning to annual high territory at 0.79.
On the equity options front, Apple Inc. (NASDAQ:AAPL) continued to see heavy put volume, despite the stock being blessed with an upgrade at Wells Fargo. Meanwhile, Facebook Inc (NASDAQ:FB) remained a perennial favorite among call traders after a Robert W. Baird & Co. survey showed positive Internet user trends. Finally, Transocean LTD (NYSE:RIG) announced that it was terminating its scheduled third- and fourth-quarter dividend payouts while taking a huge impairment charge in the quarter.
Apple Inc. (AAPL)
Citing an overdone correction in the market, Wells Fargo upgraded APPL stock to “outperform” from “market perform” on Wednesday. Apple stock responded by jumping 5.74% on the day, closing just shy of the $110 mark. In pre-market activity, AAPL is up another 2% to $112 at last check.
Apple options volume dipped a little on Wednesday, with the 1.2 million contracts traded arriving just below AAPL stock’s average volume during the past week. What’s more, puts remained in the driver’s seat, accounting for 51% of the day’s activity.
Looking at tomorrow’s weekly August 28 series expiration, the $110 and $115 strikes could come into play for AAPL. The August $110 strike is home to 27,138 call contracts and 13,297 puts contracts, while the $115 strike sports call OI of 27,883 contracts. While $110 could emerge as a short-term support level through tomorrow’s close, the $115 strike could pose short-term resistance for AAPL.
Facebook Inc (FB)
Facebook came out of a recent Robert W. Baird & Co. survey smelling like a rose. The company was joined by Amazon.com, Inc. (NASDAQ:AMZN) and Google Inc (NASDAQ:GOOGL) as one of the most trusted Internet companies heading into the fourth-quarter shopping season. According to the Baird survey, Facebook is the most popular daily service across all consumer age groups, making up 60% of daily activity. Furthermore, Facebook’s Instagram service was No. 2, capturing 30% of daily activity.
On the options front, FB stock remains a favorite among options traders. On Wednesday, the stock saw volume come in at 273,530 contracts, with calls making up 66% of the day’s take. From a weekly perspective, traders should keep an eye on the August $90 strike, where 8,831 calls and 4,035 puts are currently open. With the shares trending higher in pre-market activity, FB could make a run at $90 heading into the weekend.
Transocean LTD (RIG)
On a day where nearly every stock on Wall Street found a way to head higher, RIG stock managed to plunge 5%. Driving the losses was the announcement that, Transocean was canceling its scheduled third- and fourth-quarter dividend payments — a move that many believe is the end of the company’s dividend program all together. Additionally, Transocean said it will take a roughly $2 billion impairment charge on its balance sheet related to the scrapping of old and idled rigs.
Options traders followed suit with stock traders, piling into RIG puts on Wednesday. Volume swelled to a near-term high of 268,510 contracts, with put volume coming in at 93% of the day’s total. RIG is currently trading well below most major accumulations of put and call open interest in the weekly August series, though there are still about 1,046 contracts at the $12 put strike that could offer some support through the close tomorrow if RIG stages a bounce back today.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
